Study of e-commerce definition for possible SST exemption

KUALA LUMPUR: The government is studying the definition of e-commerce and online businesses to see if they qualify for exemption under the new sales and service tax (SST) regime for supporting the growth of the country’s digital economy, said Finance Minister Lim Guan Eng.

“We have to see the definition of online business. If you look at information technology (IT) services for example – it should face a 6% service tax but we decided to give a leeway.

“For instance, cloud service providers — under IT services — they will be charged 6% but because it is a cloud service provider [and] rides on the server of telecommunication providers, we don’t impose the tax at the business-to-business level to avoid multiple taxation, he told reporters at sales and services tax briefing here yesterday.

He said exemptions are given in sectors where the government is keen on encouraging them. But he said the government will not be able to give full tax exemption for IT services, where the definition is very wide.

“So we have to ensure that it is really related to IT, and that it contributes to the digital economy [before an exemption is given],” Guan Eng said when asked to comment on the government’s taxation plan for e-commerce and online businesses.

He reiterated that the SST’s taxable and exemption list is a living list — meaning it can be changed any time — and that the government will continue to engaging with people and businesses in order to be fair to all and to encourage economic growth.

“The entire economic structure has changed (as) we enter the Industry 4.0 (era). In this digital economy, we find that traditional businesses have changed or modified. Sometimes these changes have to be reflected in the taxation system.

“Previously, we did not see tax exemptions (under the now defunct goods and services tax) but now the exemptions arise. I want to stress the list is a living list. We want the economy to move with the times,” he added.